If your business has reached the point where you need dedicated financial leadership, you likely face the key decision: should you hire a fractional or full-time CFO? 

It’s a critical call. The right financial steward can rocket fuel your growth. The wrong fit sinks you with unnecessary costs or advice that misses the mark.

This decision is rarely black and white. The best option depends entirely on your specific situation. 

Below we’ll break down the key differences, pros and cons, and advice on deciding between the two models. Time to finally make sense of fractional vs. full-time CFOs.

Defining the Key Differences

First, what exactly is a fractional CFO?

A fractional CFO is an experienced financial leader who works part-time for multiple companies at once. They provide high-level expertise on a project or hourly basis.

A full-timer, as you’d expect, works for you exclusively and oversees your finances full-time as an employee.

The divides between the two models stem from this core time commitment difference:

– Fractionals work part-time – typically 10-35 hours per month across all clients. Full-timers clock a standard 40+ hours focused solely on you.

– Fractionals charge project or hourly fees based on time spent. Full-time CFOs draw an annual salary generally between $150k-$300k.

– Fractionals specialize in targeted areas like forecasting or capital raising. Full-timers need broad knowledge of all aspects of finance.  

– Fractionals juggle multiple clients at once. Full-timers dedicate their skills exclusively to you.

– Fractionals complete specialized tasks or initiatives. Full-timers get involved in long-term strategic planning.

So in essence: fractionals are flexible specialists. Full-timers are dedicated generalists.

With the basics covered, let’s examine the upsides and downsides of each flavor.

The Perks of Fractional CFOs

Cost Savings

Hands down the biggest appeal of fractional CFOs is cost. You pay only for the time you need. 10-15 critical hours per month may be sufficient advisory at a fraction of a full salary.

For context, capable fractionals charge $150-$500 per hour. At $500 an hour, that’s $6k per month for 12 hours. Or $72k annually if you max out at 35 hours a month of advisory.  

Compare that to a talented full-time CFO salary of $150k or more. The savings are staggering in the early days.

Financial wisdom on your budget. You can’t beat that if you don’t yet need 40 hours of finance leadership each week.

Specialized Skills  

Here’s another advantage of the fractional model – targeted expertise. Most full-time CFOs need to competently oversee all aspects of finance. 

Fractionals, however, can specialize in hot skill areas like capital raising, M&A, modeling, investor relations…you name it. 

You can mix and match specialists tailored to your current growth priorities. An elite fundraiser for this quarter. A modeling guru for year-end forecasting.

It’s like hiring a CFO with superpowers aligned to your business’ needs at the moment.

Flexibility  

With fractionals, you maintain flexibility you rarely get as an employer. Ramp hours up when you’re capital raising or acquiring companies. Scale back during slower quarters. 

You retain agility to pivot your financial strategy while only paying for expertise during crunch time.

With a full-timer, you lose that flexibility. You’ve committed to set costs whether they’re busy or idle. Make sure you actually need 40+ hours before committing.

Lack of Long-Term Commitment

Here’s another benefit of the flexible fractional model – the lack of long-term commitment. If the partnership isn’t the right fit, you simply scale down hours or part ways.

If your startup is still finding product-market fit and pivoting strategies, you may want to postpone a long-term fixed cost like a full-time CFO. Test the waters with fractionals first.

Once you lock-in skyrocketing growth, pull the trigger on a full-timer. But retain flexibility in the early days.

Objective Outside Perspective

An outside perspective provides unique value in finance compared to other departments. Founders often seek fractional CFOs *because* they come unbiased.

An experienced fractional CFO assesses your finances through a lens not distorted by office politics or entrenched practices. 

They benchmark your performance against industry standards, not just your own history. And make recommendations accordingly.

An outsider’s brutally honest take may sting, but ultimately makes your finances healthier.

The Perks of Full-Time CFOs

Okay, now that we’ve pumped up fractionals, let’s highlight some distinct upsides to full-time CFOs.

Complete Focus Dedicated to You

This is the crux of the issue. Full-time CFOs dedicate their working hours solely to you. No split attention across clients. Just obsessive focus on your financial success.

With intimate knowledge of your team and strategic priorities, full-timers provide tailored financial leadership. Not just generalized advice.

If you need 30-40 hours of finance direction per week, a full-timer’s undivided attention provides massive value.

Involvement in Long-Term Vision

Full-time CFOs play a larger role in shaping long-term vision and direction. They assess financial impacts of potential growth initiatives and strategy shifts.

Fractional CFOs provide strategy guidance but with less visibility into day-to-day operations. Full-timers translate strategy into models and execution plans.

So if you expect hypergrowth, locking down full-time financial leadership early creates continuity amidst scaling chaos. 

Stability and Consistency

Hiring a full-time CFO provides stability and consistency that working with multiple fractionals lacks. No learning curves in bringing new advisors up to speed all the time.

With a trusted full-timer, you remove ongoing worries about backfilling support each quarter or year. Complete confidence that financial leadership is solidified for the haul.

Cultural Fit and Vision Alignment

Here’s an intangible advantage of full-time over fractional – you have more opportunity upfront to assess culture fit and vision alignment. Is this someone you want partnering alongside you for years as a key executive?

With a fractional, fit and mutual trust matters less. You tap them periodically for specialized tasks then they’re off to other clients. Less relationship emphasis.  

More Affordable at Scale

Full-time CFO salary costs eventually become more affordable as your revenues grow. Once past $10M in revenue, specialized fractionals can be costlier than a full-timer.

Between financial systems, internal team, and strategy knowledge a full-timer gains, their impact outweighs the larger fixed costs.

How to Decide: Fractional vs Full-Time CFO

So how do you determine what’s right for your company? Here are key considerations:

Growth Stage

If sub $5M in revenue, fractional likely makes financial sense. Between $5-10M, fractional plus outsourced accounting is often ideal. Above $10M and you can justify a full-timer.

Hours Needed Per Month

If you only need 10-15 hours of high-level CFO time per month, stick with fractional. If your CFO hours approach 30-40, full-time makes sense. 

Specialized Expertise Needed

If you need a fractional guru for a particular initiative like investor deck development or IPO prep, leverage them even at higher revenue. Supplement with internal finance staff.

Growth Trajectory 

If you expect hockey stick scale soon, consider hiring full-time early on to oversee expansion. But keep flexibility if growth stalls.

Cultural Fit 

Cultural style match is crucial for a full-time partner but less important for specialized fractional work. Still ensure good communication fit.

Internal Team Strengths

If your controller and finance staff need bolstering, a full-time CFO provides stability. If you have a solid team, fractionals inject targeted expertise.

Economic Conditions

In uncertain times, the variable costs of fractionals allow flexibility if the market shifts. Locking in a full-time salary feels riskier.

Evaluate where you are in your growth story. Listen to your current finance team on their capacity and strengths. Stay nimble but don’t delay too long before scaling up financial oversight as needed.

The needs of a $1M startup wildly differ from a $50M mid-size company. Constantly assess if your financial leadership model still aligns with your stage and goals.

Fractional CFOs offer cost efficiency. Full-timers provide dedicated ownership. Combine both approaches to build an ideally balanced finance function.

The key is maintaining flexibility. Don’t overcommit to a full-time CFO too early or delay so long that the chaos of rapid scale without oversight kicks in.

Grow your financial leadership judiciously at each new stage of the journey. That’s how you pour the rocket fuel on growth while retaining stability through the volatility.

Does this help frame the critical fractional vs full-time CFO decision? What unique dynamics does your company face in needing to add financial leadership? Would love to hear your biggest considerations at your current stage of growth. Let me know in the comments!